Appointing of Appraisers and Umpire in Residential ‘Replacement Cost’ Dispute

Jun 24, 2020


Citation: Kenney v. Johnson Inc., 2020NSSC196

Date: 20200624

Docket: Pic. No. 490773

Registry: Pictou


E. Bernice Kenney



Johnson Inc. and Unifund Assurance Company/

Unifund, Compagnie D’Assurance





The Honourable Justice Scott C. Norton


June 18, 2020, in Pictou, Nova Scotia

Written Decision:

June 24 , 2020


Donn Fraser, for the Plaintiff/Respondent

Lisa Richards, for the Defendants/Applicants


By the Court:

[1] The Defendants/Applicants Johnson Inc. and Unifund Assurance Company/ Unifund, Compagnie D’Assurance (“Unifund”) filed a motion for an order compelling the Plaintiff, E. Bernice Kenney (“Kenney”), to appoint an appraiser pursuant to the Insurance Act, RSNS 1989, c.231 (“Act”). The Plaintiff objects to the appointment of an appraiser and says that the appraisal process under the Act is not engaged on the facts of this case.

[2] The motion was heard remotely on June 18, 2020 due to the Covid-19 pandemic. The Plaintiff passed away on December 30, 2019 but, by the time her estate was probated, the restrictions on court filings due to the pandemic prevented the appropriate changes to the Style of Cause. The parties advised that they would deal with that by separate consent order to appoint the personal representative of the estate as Plaintiff.


[3] The background to the present motion is not contested. The Defendant, Unifund Assurance Company/ Unifund, Compagnie D’Assurance (Unifund), insured Kenney’s house under a home insurance policy (“Policy”). A claim was made on the policy following the total loss of the Kenney house and contents as a result of a fire on November 6, 2017. The parties have settled the claims for the contents of the house and the additional living expenses resulting from the fire. In addition, Unifund has paid the Plaintiff the actual cash value of the destroyed house in the amount of approximately $366,000.00 which would be deducted from any amount payable for replacement of the house.

[4] The Policy contained a provision providing coverage for “Guaranteed Replacement Cost” (“GRC”). Unifund admits that the replacement cost coverage applies to the loss. The parties have not been able to agree on the replacement cost under the GRC coverage. Reconstruction of the house has not commenced.

[5] Each party retained the services of a contractor to provide them with a replacement cost estimate. The Plaintiff retained Open Door Contracting (“Open Door”) and the Defendant retained Paul Davis Systems (“PDS”). The two estimates differ by approximately $400,000.00.

[6] Counsel exchanged letters starting in June 2019, with counsel for the Plaintiff questioning the reasons for the difference in the estimates; raising concerns that PDS was not working from the same design plans and scope of work as Open Door; and, that PDS was not accounting for the quality of materials and fixtures present in the destroyed house that would have to be replaced with those of similar quality. PDS did not meet with Kenney or her family to obtain details of the interior fixtures and materials. Kenney advised Unifund that they would require production of additional documents and information about the assumptions made by PDS in providing their estimate. That additional information had not been produced as of the hearing of this motion. Discovery examinations have not been held.

[7] Unifund gave written notice on February 28, 2020 that it was “invoking the statutory appraisal process to determine that amount” and appointed Paul Davis Systems (PDS) as its appraiser.

[8] Kenney responded to Unifund on March 5, 2020, posing a number of questions about how the appraisal process could work in a replacement cost dispute prior to construction commencing. Counsel for the parties exchanged a number of emails debating the merits and entitlement to invoke the appraisal process.

[9] The motion before the court was filed May 18, 2020 and scheduled for hearing on June 18, 2020. The parties agreed to proceed with the motion remotely and confirmed that no cross-examination was required on the affidavits filed. Both parties filed affidavit evidence and briefs. I have reviewed and considered all of the written materials and the case law cited by both parties.

Preliminary Issue – Affidavit Evidence

[10] Unifund objects to portions of the affidavit of Alan Kenney filed on June 11, 2020. Specifically, paragraphs 4, 7-9, 12-14, and 16-22. The Affidavit attached the following Exhibits:

A. Blueprints or plans that Kenney obtained for the rebuild

B. Open Door quote dated October 2018

C. Revised Estimate from PDS

D. Correspondence from Plaintiff counsel to Defendant counsel dated July 22, 2019

E. Correspondence from Plaintiff counsel to Defendant counsel dated November 12, 2019.

[11] Unifund says that the objectionable paragraphs are irrelevant, contain hearsay and express opinion; and further, that the letters from counsel attached as Exhibits “D” and “E” are irrelevant. Finally, it submits that the final two paragraphs of the affidavit are irrelevant in that they relate to the fact that Ms. Kenney passed away; the intention to amend the Style of Cause and Statement of Claim; the intention to bring a motion to compel production of additional material from PDS; and that these intended procedures were delayed by the suspension of normal operations by the Court.

[12] In determining the admissibility of the Kenney affidavit, I have applied the law as set out in the decisions of this court in Waverly (Village) v Nova Scotia (Minister of Municipal Affairs), 1993 NSSC 71, and Abbott and Haliburton Company v WBLI Chartered Accountants, 2012 NSSC 210 ( affirmed on this point 2013 NSCA 66).

[13] I do not agree that the affidavit is objectionable on the basis of hearsay. In interlocutory applications such as this, hearsay in affidavits is permitted by Civil Procedure Rule 22.15:

22.15 (1) The rules of evidence apply to the hearing of a motion, including the affidavits, unless these Rules or legislation provides otherwise.

(2) Hearsay not excepted from the rule of evidence excluding hearsay may be offered on any of the following motions:

(a) an ex parte motion, if the judge permits;

(b) a motion on which representations of fact, instead of affidavits, are permitted, if the hearsay is restricted to facts that cannot reasonably be contested;

(c) a motion to determine a procedural right;

(d) a motion for an order that affects only the interests of a party who is disentitled to notice or files only a demand of notice, if the judge or the prothonotary hearing the motion permits;

(e) a motion on which a Rule or legislation allows hearsay.

(3) A party presenting hearsay must establish the source, and the witness’ belief, of the information.

(4) A judge, prothonotary, commissioner, or referee may act on representations of fact that cannot reasonably be contested.

[14] The hearsay contained in the affidavit identified the source and the affiant’s belief of the information. I find those paragraphs admissible.

[15] I do not agree that the letters from counsel attached to the affidavit as exhibits are irrelevant. The letters speak to the issues before the Court related to whether there is a disagreement on value or whether the issues are broader and beyond the scope of the statutory appraisal process. There are parts of the letters that deal with separate issues not before the Court but these were not relied on by the Plaintiff. I note that the Defendant attached correspondence between their counsel and Plaintiff counsel. They submitted those letters were different because they were written after the notice for appraisal was sent. I do not see that as a legal distinction of their relevance to the issues before the Court on the motion.

[16] With regard to the references in the letter to conversations between the affiant and Unifund’s claim handler, the affiant confirmed in the affidavit itself that those conversations were accurately reflected in the letter. There was no request to cross-examine the affiant and no rebuttal affidavit was filed denying the truth of the contents of the letters. I find the letters admissible. I agree that paragraph 16 of the affidavit contains an expression of opinion by the affiant that he is not qualified to make. That paragraph will be struck. As to the last two paragraphs, I find that they are relevant in that they provide the Court with evidence of the passing of the named plaintiff and why the intended procedures of personal representative were delayed.

The Insurance Policy

[17] The Policy was issued for the period 01 August 2017 to 01 August 2018. It names E . Bernice Kenney as the Insured. It insures the dwelling building located at 199 Five Point Road in Glenholme, Nova Scotia as a detached single family home for the amount of $691,000.00. The Policy wording is identified on the insurance certificate as being written on Form 1122. The certificate records that there is “Guaranteed Replacement Cost” coverage on the insured dwelling building.

[18] The insurance coverage is stated in the Form 1122:

Coverage A – Dwelling Building and Coverage B – Additional Buildings

If you repair or replace the damaged or destroyed building(s) on the same site, with a building of the same size and occupancy, constructed with materials of similar quality, within a reasonable time after the damage, we will pay the cost of repairs or replacement (whichever is less) without deduction for depreciation. If you decide not to repair or replace the damaged or destroyed building(s), we will pay the actual cash value of the damage at the date of the occurrence.

Coverage A – Dwelling Building Only

If Guaranteed Replacement Cost is indicated on the Coverage Summary Page, we provide Guaranteed Replacement Cost on “Coverage A – Dwelling Building” which means we will pay the cost of repairs or replacement, on the same site, even if it is more than the amount of insurance for “Coverage A”, provided:

• the amount of insurance for “Coverage A”, shown on the Coverage Summary Page on the inception date of the policy, or the most recent renewal date, or the increased amount under the inflation protection coverage on the date the increase took effect, was not less than 100% of the cost to replace the dwelling building, as determined by a valuation guide acceptable to us;

• the amount of insurance on “Coverage A” has not been reduced below the amount determined by the valuation guide; and

• you notified us within 90 days of the start of the work. if any improvement, extension or addition has been made to your dwelling that will increase the replacement cost of the dwelling building by $30,000 or more.

When this guarantee is applied on any principal dwelling claim, the total amount of insurance available for other insured coverages is the single amount minus the amount of insurance on “Coverage A” shown on the Coverage Summary Page.

[emphasis by underlining added]

Insurance Act

[19] Home owner insurance policies that insure, inter alia, against the risk of fire, are regulated under Part VII of the Insurance Act, RSNS 1989, c. 231 (“Act”). Section 167 establishes the statutory conditions deemed to be part of every contract of fire insurance:

(2) The conditions set forth in the Schedule to this Part shall be deemed to be part of every contract and shall be printed on every policy with the heading “Statutory Conditions” and no variation or omission of or addition to any statutory condition shall be binding on the insured.

[20] The Schedule in Part VII of the Act sets out the statutory conditions. Statutory Condition 11 says:

Appraisal: In the event of a disagreement as to the value of the property insured, the property saved or the amount of the loss, those questions shall be determined under the Insurance Act before there can be any recovery under the contract.


[21] Section 32 of the Act provides the process for appraisals referred to in Statutory Condition 11:

32 (1) This Section applies to a contract containing a condition, statutory or otherwise, providing, in the event of difference or disagreement between the insured and insurer, for appraisal to determine the matters specified in the condition.

(2) The appraisal shall be made by two disinterested appraisers, the insured and the insurer each selecting one and the two so chosen then selecting a competent and disinterested umpire.

(3) The appraisers shall then determine the matters specified in the conditions and, if they fail to agree, they shall submit their differences to the umpire, and the finding in writing of any two determines the matters.

(4) Each party to the appraisal shall pay the appraiser selected by him and shall bear equally the expense of the appraisal and umpire.


(a) a party fails to name an appraiser within seven clear days after being served with written notice so to do;

(b) the appraisers fail to agree upon an umpire within fifteen days after their appointment; or

(c) an appraiser or umpire refuses to act or is incapable of acting or dies,

a judge of the Supreme Court or the county court having jurisdiction in the county or district in which the appraisal is to be made may appoint an appraiser or umpire, as the case may be, upon the application of the insured or of the insurer.

The Parties’ Positions

[22] Unifund says that having given notice of its desire to invoke the appraisal process under the Act, the appraisal process is mandatory and the Court should order the Plaintiff to appoint an appraiser and, if none is appointed, direct the appraisal process to proceed without the Plaintiff’s appraiser.

[23] Unifund submits that although section 32 says that where a party does not appoint an appraiser within seven clear days after being given notice to do so the Court “may” appoint an appraiser, the language of Statutory Condition 11 is that the disagreement referred to in the Condition “shall” be determined under the Insurance Act.

[24] Unifund submits that once appointed, the appraisers and an umpire, if necessary, assess and determine quantum issues for the parties to the insurance contract. Further, that this includes claims for replacement cost because a claim for replacement cost has no special character or quality that sets it outside the statutory appraisal process.

[25] The Plaintiff says that the application should be dismissed because:

1. There is technically no “dispute” as to value, per se as required by Statutory Condition 11;

2. Statutory Condition 11 should be interpreted so as to not apply to the determination of GRC indemnity in a case such as this;

3. The Court has and should exercise discretion to not impose the appraisal process in this case;

4. The exercise necessary in this case to determine indemnity entitlements is not appropriate for the appraisal process, such matters being properly vested with the Court for determination.


[26] The statutory appraisal process has been lauded in various court decisions as advantageous to both the insured and the insurer. In Agro’s Foods v Economical 2016 ONSC 1169, the Court described it as:

“an efficient method to resolve valuation issues between the insurer and the insured, largely due to the efficiency and cost- effectiveness it can provide. Courts should not be overly eager to interfere in the operation of the section.” [para. 53]

[emphasis added]

[27] In 2343697 Ontario Inc. v. Aviva Insurance Company of Canada, 2019 ONSC 3106, Myers J observed (para. 18):

it is the intention of the statute that the issue of proof of the quantum of damages in a property case will not be before the court. Appraisal is a quicker, expert process designed to control costs and to provide efficiency. It was as much incumbent on the plaintiffs to commence the appraisal process as the defendants.

[emphasis added]

[28] In Seed v. ING Halifax Insurance, 2005 CarswellOnt 6554, [2005] O.J. No. 4870, [2006] I.L.R. I-4459, 144 A.C.W.S. (3d) 147, 261 D.L.R. (4th) 489, 33 C.C.L.I. (4th) 126, 41 Admin. L.R. (4th) 119, 78 O.R. (3d) 481, Justice Lax described the statutory appraisal process:

23 The purpose of the appraisal process under s. 128 [ NS section 32] of the Insurance Act is to provide an expeditious and easy manner for the settlement of claims for indemnity under insurance policies. It is intended to be a final and binding determination of the loss: Krofchick v. Provincial Insurance Co. (1978), 21 O.R. (2d) 805 (Ont. Div. Ct.); Trentmar Holdings Ltd. (Athena Restaurant) v. Williams (1984), 6 C.C.L.I. 180 (Ont. H.C.) at para. 10. Courts have afforded substantial deference to an appraisal under the Insurance Act and the appraisal process, which is not subject to the provisions of the Statutory Powers Procedure Act, R.S.O. 1990, c.22. Unless there is proof of misconduct or that the appraisers or Umpire exceeded their jurisdiction, courts have been reluctant to interfere.

[emphasis added]

[29] The statutory appraisal process was considered by the British Columbia Court of Appeal in Arlington Investments Ltd. v Commonwealth Insurance Co., 1985 CarswellBC 25, [1985] I.L.R. 1-1901, [1985] B.C.W.L.D. 674, 16 D.L.R. (4th) 465, 30 A.C.W.S. (2d) 149, 60 B.C.L.R. 113, 8 C.C.L.I. 153 :

15 Section 11 [NS section 32] of the Act headed “Appraisals” provides for the appointment of appraisers. It reads:

11.(1) This section applies to a contract containing a condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of a disagreement between the insured and the insurer.

(2) The insured and the insurer shall each appoint an appraiser, and the 2 appraisers appointed shall appoint an umpire.

(3) The appraisers shall determine the matters in disagreement and, if they fail to agree, they shall submit their differences to the umpire, and the finding in writing of any 2 determines the matters …

(5) Where

(a) a party fails to appoint an appraiser within 7 clear days after being served with written notice to do so;

(b) the appraisers fail to agree on an umpire within 15 days after their appointment; or

(c) an appraiser or umpire refuses to act or is incapable of acting or dies,

the County Court of the county in which the appraisal is to be made may appoint an appraiser or umpire, as the case may be, on the application of the insured or of the insurer.

Subsection (5) provides that in the circumstances stipulated in paras. (a), (b) and (c) a judge of the County Court “may appoint” an appraiser. It does not limit the discretion of a judge to appoint an appraiser. The only limitation is the one that applies to the exercise of discretion generally, that is, the judge must exercise a discretion judicially, not capriciously. On the hearing of an application under s. 11, a judge may (1) grant the application; (2) dismiss it; or (3) defer the determination of it until a later date. His decision will depend on the circumstances of each application and the evidence adduced in support of it, but in making his decision the judge should bear in mind that the purport of the legislation is to have an appraisal.

[emphasis added]

[30] The Court in Arlington also addressed the applicability of the statutory appraisal process to a claim for replacement cost:

18 Aside from the issue of whether a question of law is involved, I see nothing in the provisions of stat. con. 11 which precludes an appraisal on a replacement cost basis. The condition provides that in the event of a disagreement as to the amount of the loss this issue “shall be determined by appraisal as provided under the Insurance Act …” The obvious intent of the appraisal provisions of the Act is that the appointment of appraisers will result in the expeditious determination of the loss.

19 … The fact that there may be an issue of law as to whether the replacement was executed “with due diligence and dispatch” or who is responsible for the replacement does not require the conclusion that it would be inappropriate for appraisers acting under s. 11 to attempt to arrive at the loss on a replacement cost basis. Obviously, there will be cases where there will be no dispute as to the applicability of the replacement cost endorsement.

[emphasis added]

[31] The same conclusion was reached by the Saskatchewan Court of Appeal in Saskatchewan Government Insurance v. Nipawin (Town), 1998 CarswellSask 833, [1998] S.J. No. 883, [1999] I.L.R. I-3652, 169 D.L.R. (4th) 713, 172 Sask. R. 245, 185 W.A.C. 245, 7 C.C.L.I. (3d) 159, 85 A.C.W.S. (3d) 674, where Justice Lane stated the law in that province as follows:

11 The Court of Queen’s Bench has followed two paths in its interpretation of s. 108(5) [NS section 32]. The chambers judge chose to follow Shinkaruk v. Ecclesiastical Insurance Office Public Ltd. (1991), 98 Sask. R. 119 (Sask. Q.B.). In that case an insured applied for an order pursuant to s. 108(5) appointing an appraiser and the insurer opposed the application on the basis it would be costly for both parties and would be of no benefit as the insured buildings were already demolished. The insurer further argued a trial was necessary and the appointment of an appraiser would not end the action.

12 After citing a number of authorities including Shinkaruk v. Ecclesiastical Insurance Office Public Ltd., supra and Arlington Investments Ltd. v. Commonwealth Insurance Co. (1985), 8 C.C.L.I. 153 (B.C. C.A.) as well as other cases involving Shinkaruk, the court came to the view, after recognizing the conflicting authorities, there was a discretion and that such discretion to appoint an appraiser “better conforms with the wording of s. 108(5) which states that the court “may” appoint”.

13 The respondent in turn cites the unreported decision of the same Court Pankiw v. Saskatchewan Government Insurance unreported 1986 S.J.334, where on an application pursuant to Queen’s Bench Rule 188(4) for a determination of a point of law both statutory condition no. 11 and s. 108 were considered. It was held that the requirements of statutory condition no. 11 were mandatory and once brought into play there could be no action maintained for recovery under a contract of insurance until the issues in dispute had been determined by an appraisal.

14 In my view the reasoning in Pankiw is the correct one. The parties agree in their contract of insurance to give effect to a process to encourage a quick settlement of the loss and to facilitate the use of the expertise of an appraiser. The parties agree “before there can be a recovery under this contract whether the right to recover on the contract is disputed or not, and independently of all other questions” to have the value of the insured property, or the property saved, or the amount of the loss, determined by an appraisal. The intention of statutory condition 11 is unambiguous and cannot be unilaterally waived by either the insurer or the insured in the event of a disagreement. The statutory condition to which both parties agreed is clear — there must be an appraisal before there can be any recovery under the policy.

15 Such was the result in M & P Enterprises Ltd. v. London & Lancashire Guarantee & Accident Co. (1965), 54 D.L.R. (2d) 284 (Man. Q.B.) at p. 288:

Statutory condition 11 requires, in imperative terms, that the extent and value of damage caused by fire be determined by appraisal. Fire insurance policies — Canadian, British, and American — have, for upwards of 100 years, provided for the assessment of damage by way of inspection by impartial third parties, call it what you will. The practice accords with common sense, and is a convenience to the Court by way of reference to that extent. The insurer has an absolute right (unless waived by writing clearly expressed for the purpose) to insist upon the observance of that requirement, the assurance of which right, formerly stat. con. 22, was by 1956 (Man.), c.36, s.16 reenacted as s.136A(1) of the Act.

16 This result also accords with this Court’s decision in Shinkaruk Enterprises Ltd. v. Commonwealth Insurance Co. (1990), 85 Sask. R. 54 (Sask. C.A.). There the issue arose not as the principal one but as a subsidiary issue. The Court, speaking through Bayda C.J.S., held that condition 11 was a term in the contract and like any other term in a contract was binding on both parties unless otherwise agreed by them or unless it was impossible to perform (see paras 28 – 33).

17 The purpose of s. 108(5) is to entitle either party to the insurance contract to seek the assistance of the Court to overcome a process stumbling block that impedes the carrying out by the parties of the terms of the contract. Where all of the necessary prerequisites to the application have been satisfied the Court is empowered to render the assistance, remove the stumbling block and pave the way for the carrying out of the terms of the contract as originally intended by the parties. To construe the word “may” in s. 108(5) as entitling the Court to refuse, unjustifiably, to render the assistance sought would defeat the purpose and intent of condition 11 as well as the remainder of s. 108 and would be contrary to the intention of The Saskatchewan Insurance Act. The intent of condition 11 was noted in Shinkaruk Enterprises Ltd. v. Commonwealth Insurance Co., supra to be, “to facilitate the quick settlement of a valid claim by the insured rather than to defeat it.”

[emphasis added]

[32] These authorities, while not binding, are persuasive.

[33] In oral submissions at the hearing, Unifund argued that the statutory appraisal process was an alternative dispute resolution process that would allow those with expertise in the issues of design, scope, materials and construction methods – the appraisers – to meet and determine what they could agree on and what issues they could not agree on. Unifund envisages a two-stage process where the appraisers meet to discuss their respective appraisals and the bases for them and then report back to the parties as to what aspects of the cost of replacement they have agreed on and what aspects they disagree on. The parties (with their counsel) then determine what issues are legal and need to be resolved by the Court (on an interlocutory basis or at trial) or relate purely to valuation and can be resolved by the appointment of an umpire. Unifund argues that this process is far more cost effective. Unifund says that the process contemplates full disclosure of relevant documents by the parties and that the appraisers (and umpire) could receive evidence from the Kenney family (such as photographs and interviews) as to the materials and fixtures that were present in the destroyed house that are to be replaced with materials and fixtures of similar kind and quality.

[34] It is noteworthy that the Act does not provide any direction on the process to be employed by the appraisers and umpire. Unifund submits that the process can be flexible depending on the nature of the disagreement. This appears to accord with the process described by the court in Seed, supra, where the judge noted that the umpire agreed upon was a lawyer and described the expected process as follows:

5 The parties initially agreed to appraisal dates of May 22-25, 2001, which were consensually changed to June 14-15, 2001. At a pre-hearing meeting with the Umpire on June 12, 2001, Ms. Seed’s lawyer advised that he planned to call up to 96 witnesses. Given the volume of material and the number of witnesses, the Umpire established new dates in September, October and November. A site visit was arranged for June 14, at which time Mr. Hall [Ms. Seed’s appraiser], among others, was present. Over the summer, the appraisers sought to narrow the issues, but they were unable to make much progress due to their differing views on the presence of mould.

[35] In essence, the umpire chosen by the parties, or appointed by the Court if they cannot agree, is someone who preferably has legal training and some experience dealing with construction design, methods and materials including costing. The umpire may, but is not obliged to, receive evidence on the valuation issue. I would consider it extreme to have an umpire hear from 96 witnesses in a case such as this one. However, it could certainly be appropriate for an umpire to have evidence from the Kenney family on the issues of fixtures and finishes that existed in the destroyed house. This process should allow for a more timely and economical resolution of these issues than a trial and, in particular, where the umpire has legal training and can identify those legal issues that are beyond the scope of the appraisal process and must be resolved by the Court, for example, what the building codes or by-laws in place at the date of loss require in the reconstruction (if not agreed by the parties).

[36] It is clear from the authorities cited by the parties that the appraisal process does not usurp the role of the Court in insurance coverage disputes. It is confined by the language of Statutory Condition 11 to “disagreement” as to the value of the property insured, the property saved, or the amount of the loss.

[37] The Plaintiff conceded during submissions that the appraisal process could apply to a replacement cost claim if the parties agreed on the scope of the loss (i.e. the design of the reconstruction; the dimensions of each room and the structure overall; the fixtures and finishes that were in the lost structure that must be replaced with similar quality; and, any changes in the design or construction required by new building codes or bylaws). If, with all these parameters agreed, there remains disagreement between the appraisers as to the cost of reconstruction this could be resolved by the appraisal process.

[38] The Plaintiff argues however that this is not the case before the Court. It is the parameters that are not agreed between the parties and those parameters are informed by the interpretation of the insurance contract and are therefore issues exclusively within the jurisdiction of the Court.

[39] Based on the authorities, I conclude that the statutory appraisal process can apply to replacement cost coverage where all of the inputs or parameters to the valuation are not agreed between the parties. The appraisers are in the best position to identify where their respective assessments of the replacement cost agree and where they do not. By the appraisers reporting back to the parties identifying the issues of disagreement, the parties can determine whether all or some of those issues can be resolved through negotiation, the appointment of an umpire, and/or those which must be resolved by the Court. If an umpire with legal experience is appointed, there is further assurance for the parties that legal issues will be set aside for determination by the Court. However, all remaining issues of valuation will have been resolved. It may be, for example, that the umpire provides alternative valuations depending on how the Court interprets an identified legal issue. This approach minimizes trial time to those issues that are legal in nature and as such is more efficient and cost effective to both the parties and to the administration of justice.

[40] It is apparent from the exchange of correspondence between the parties that the estimates prepared by Open Door and PDS differed in relation to whether they contained “like kind and quality” materials as existed in the destroyed house. In the letter to Defendant counsel dated July 22, 2019 Plaintiff counsel writes:

“On February 21, 2019 Mr. Fancy (Unifund claim handler) then suggested to Mr. Kenney that it did not appear Open Door’s quote was based upon like kind and quality (we are unclear how he was able to from (sic) that view)…

We understand the initial appraiser and then PDS did not have any material direct contact with the Kenney family in any effort to determine what exactly would be like kind and quality replacement required in this case.”


[41] I agree with the submission of the Plaintiff that the two estimates appear not to be comparable as “apples to apples” assessments of the same work and material. I also agree with the submission of Unifund that at this point in time we do not know what all the reasons for the differences are; whether those issues are valuative in nature or legal. Those with expertise in reconstruction – the appraisers – are best able to initially identify for the parties what the issues are between the two appraisals.

[42] Legal issues are not within the jurisdiction of appraisers and the umpire to resolve (See Agro’s Foods, supra, at para 56). It is premature at this point to presume what legal issues may have to be resolved coming out of the appraisal process. The appraisers and umpire, if necessary (particularly one with legal training), can resolve all of the non-legal issues in a more efficient and effective manner, narrowing the issues left for the trial court.

[43] I wish to clearly state that the appraisal process does not operate as a stay of the legal proceedings and thus the parties should continue to deal with any litigation issues unrelated to the appraisal. [See Agros Foods, supra, at para. 60]

[44] The court can be called upon as the Civil Procedure Rules permit to enforce production and discovery or to determine any legal issues identified by the appraisal process or otherwise.

[45] Once the appraisal process is complete, including the resolution of any legal issues resolved, it is presumed that a builder will enter into a contract with the insured to reconstruct the house for the appraised amount. Ultimately, the insured is entitled to the actual cost of reconstruction so long as it has been done in compliance with the policy wording. That may result in savings from the appraised amount to the insurer or there may be additional amounts payable.


[46] The motion of the Defendant is allowed. The Plaintiff is ordered to appoint an appraiser pursuant to Statutory Condition 11 and Section 32 of the Insurance Act on or before July 15, 2020 or such other date as the parties agree.

[47] I agree with Unifund that the Court has the jurisdiction to provide direction to the appraisers and umpire as to the process to follow which is unstated by the Act. An Order will be prepared by counsel for the Defendant, preferably consented to by the Plaintiff as to form. To encourage as much as possible that the appraisers are comparing “apples to apples”, I direct that the Order address the following:

1. That the parties and their appointed appraisers are to exchange all relevant, non-privileged documents in their possession related to the replacement cost of the house including blueprints, diagrams, measurements, specifications, quantities, fixtures, materials and photographs on or before July 30, 2020 or such other date as the parties agree.

2. The appraisers are to exchange their appraisal for the replacement cost of the house, updated by each of them to account for any new information provided to them by the exchange of documents, on or before August 30, 2020 or such other date as the parties agree;

3. The appointed appraisers shall meet in person or by electronic means to review and compare their respective appraisals and determine:

a. Whether they agree on the need for any design or engineering expertise to be consulted and, if they cannot agree, the reasons for their position.

b. Whether they agree on the blueprints/ design for the reconstruction and if not, what specific issues related to the blueprints/design they disagree on and why.

c. Whether they agree on the requirements of any building code or bylaw changes that were in existence at the time of the loss that must be adhered to in the reconstruction and if not, what are the reasons for disagreement.

d. Whether they agree on the quantity and quality of materials and fixtures and the construction methods that were used in the destroyed house that are to be replaced with similar quality and if not, why not.

e. If the original construction material, fixture or method is no longer available for replacement, whether they agree on the suitable material, fixture or method of similar quality and if not, why not.

f. Whether they agree on the trades that will be required to reconstruct the house, the time estimates for each trade’s work and the costing of the labour for each trade’s work, and if not agreed, why not.

g. Whether they agree on a contingency for the total price of the reconstruction, and if not, the detailed basis upon which each proposed contingency is calculated.

4. The appraisers shall have the authority to request additional documents or information from the parties to assist them in answering the questions posed including the right (in each other’s presence and with counsel present) to interview members of the Kenney family to inquire as to the quantity and quality of materials, fixtures and the construction methods that existed in the destroyed house.

5. The appraisers shall report in writing to the parties on those items identified in paragraph 5 and any other relevant issues on or before October 15, 2020 or such other date as the parties agree.

6. In the event of the need for appointment of an umpire, the parties may, if they cannot agree, return to me for direction on the qualification, terms or conditions of appointment and timeline for reporting.

7. Any other provisions that the parties consent to.

[48] The Defendant shall be awarded costs of the application based on Tariff C in the amount of $1000, inclusive of disbursements, payable in any event of the cause at the conclusion of the proceeding.

Norton, J.

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